Strategy Integrates

1. Strategy Integrates STRATEGY Environment Firm Search for resources and capabilities that provide the firm with sustainable competitive advantage

2. Sources of Profitability Profitability Environment Firm Industry Resources Capabilities Remote

3. Traditional or IO Model Stakeholder Model Value Chain Model Resource-Based View (RBV) Knowledge-Based View Models of the Firm External Internal Locus of Control

4. Internal Analysis • The objective of the analysis is to • Examine the firm’s business strategy • Addresses conditions in the external environment • Creates value for the market and profits for the firm • Deters competitors • Identify the firm’s core competencies • Evaluate the effectiveness of the core competencies to support strategy and create sustainable competitive advantage

5. Assumptions • All firms are alike and all firms are different • Success of individual firms depends on the differences – the strength of the unique set of skills,resources and organizational capabilities the firm has developed over time • align with external conditions • provide value for the market • satisfy their stakeholders • create barriers to competitors

6. Strategy • Identify the strategy approach • Rational v. emergent • Low cost leader v. differentiator v. integrated • Evaluate the effectiveness of the strategy • Financial • Balanced Scorecard • Stakeholder

7. IO Model • Views the firm as an economic actor responding to market forces • The external environment is the primary determinant of success • Strategic decisions involve choosing products and markets • Primary Tools: • Environment Analysis

8. Stakeholder Model • Views firm as an extended network of relationships and dependencies • Key stakeholders determine sustainability • Primary Tools • Stakeholder Analysis

9. Views firm as a set of linked value creating activities that transform inputs into outputs Activities the firm does determines success Strategic decisions involve creating superior value at lowest cost Primary Tools: Value Chain Analysis Value Chain Model

10. The Value Chain General administration Human resource management Technology development Procurement Outbound logistics Inbound logistics Marketing and sales Operations Service

11. Value-Chain Analysis Value chain analysis involves • Identifying key activities that support the firm’s strategy • Evaluating the effectiveness of key activities • Compare the costs and value added of key activities in the value chain • Benchmarking to compare key activities to competitors

12. Resource Based View • Views firm as a unique collection of resources and capabilities • Unique characteristics of the firm determine success • Strategic decisions involve creating and sustaining competitive advantage through core competencies • Primary Tools: • VRIN Analysis

13. Resource Based Model Firm converts inputs into outputs using Resources: the assets available to a firm to develop and implement value creating strategies • Tangible: assets the firm uses to create value • Intangible: unique routines and practices that are developed over time • Human: knowledge, experience and skills of employees Capabilities: the procedures and processes the firm has developed to use its resources effectively to achieve desired ends; the ability to put resources to productive use

14. Core Competencies Competitive advantage is derived from unique resources and capabilities. Firms distinguish themselves from competitors by developing Core Competencies • The resources and capabilities of a firm that allow it to create superior value and distinction • Core competencies are the basis for competitive advantage • Core competencies are most effective when they are based on intangible resources and organizational capabilities

15. Core Competencies • Must create distinction and value • Must create barriers to competition • Path dependence • Social complexity • Causal ambiguity

16. VRIN Analysis To be a source of sustainable competitive advantage, a resource must have four attributes: • Valuable: Allows the firm to differentiate products/services and create unique value • Rare: Competitors do not have access to the resource • Inimitable: Competitors cannot easily copy or reproduce the resource • Nonsubsitutable: Equivalent resources that may allow similar strategy are not readily available

17. VRIN Analysis • Identify key competencies • Construct a VRIN Table • Look for combinations of capabilities • Assess strategic implications for success

18. Knowledge Based Model • Views firm as a collection of ‘knowledge assets’ • Success comes from deployment of existing knowledge and creation of new knowledge • Strategic decisions involve facilitating knowledge application and knowledge generation

19. Knowledge • Tacit knowledge (know-how) • Embedded in personal experience • Resides within the individual • Shared only with consent • Expressed through performance • Explicit Knowledge (know-about) • Embedded in organizational experience • Documented and codified • Can be widely distributed and shared • Expressed through routines and procedures